The Australian dollar declined against its U.S. peer after reaching the strongest in more than four months as the Reserve Bank of Australia held its key interest rate at the highest level among developed nations.
The Aussie dropped after policy makers suggested the currency may be too strong even as economic growth was on target. New Zealand’s dollar led decliners against the greenback, falling for the first time in four days, after Prime Minister John Key signaled the onus is on the nation’s central bank and private investors to aid economic growth as he seeks to eliminate a budget deficit while funding post-earthquake reconstruction.
“The RBA did take some exception to the strong value of the Aussie, so that has injected a little bit of uncertainty into the Aussie going forward,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said in a telephone interview. “That’s caused investors to trade a little bit more carefully and take the opportunity of its rise to these multimonth highs as an excuse to book some profit.”
Australia’s dollar fell 0.1 percent to $1.0554 yesterday in New York after touching $1.0604, the highest since March 20. The Aussie gained 0.3 percent to 82.96 yen.
New Zealand’s dollar, nicknamed the kiwi, slipped 0.5 percent against its U.S. peer to 81.60 cents. The kiwi was little changed at 64.14 yen.
Australia’s central bank kept its benchmark interest rate unchanged at 3.5 percent yesterday, saying current policy settings were “appropriate.” It lowered the rate by 1.25 percentage points from November to June. Policy makers suggested that the economic slowdown in its biggest trading partner, China, would not be worse than forecast, while indicating the Aussie was too strong.
“China’s growth has moderated to a more sustainable pace, but does not appear to be slowing further,” RBA Governor Glenn Stevens said. “The exchange rate, however, has remained high, despite the observed decline in the terms of trade and the weaker global outlook.”
A corrective pullback in the Aussie is likely at these levels, as the area from $1.0639 to $1.0695 includes its mid-March peak versus the greenback, Niall O’Connor, a New York-based technical analyst at JPMorgan, wrote in a note to clients yesterday.
If the Aussie depreciates to the $1.0400 to $1.4035 area, then down to $1.0345, its short-term “bullish spin” would diminish, O’Connor wrote.